The Benefits of Implementing Accrual Accounting in the United Kingdom

Transcription

1 The Benefits of Implementing Accrual Accounting in the United Kingdom 11 January 2011 Caroline Mawhood, Chair FEE Public Sector Committee Background to Accrual Accounting Decision to Implement in Central Government 1997 Local Government had accrual accounting for several years Significant project in planning and cost 2

2 Adopting accruals in the UK... Why? How? Better accountability and information for economic planning Efficiency and more effective pursuit of policy Planned using project management Sold/promoted to key stakeholders Developed expertise High level frameworks including standards Detailed accounting issues 3 PLAN/SELL THE PROJECT PLANNING Define scope, and produce overall project plan Use formal project management disciplines Use dry runs SELLING Secure political support Engage non-accountants Emphasise benefits for users Leadership and communication are vital 4

3 EXPERTISE & FRAMEWORKS DEVELOPING EXPERTISE Recruiting staff with accruals experience Training Cascading in-house knowledge Using expert trainers Involve auditors FRAMEWORKS Accounting manuals Standards Charts of accounts Budgeting Framework Procedures and IT systems 5 FRAMEWORKS IN THE UK Underlying standards Public sector accounting framework Budgetary framework IFRS IPSAS UK GAAP overall similar to IPSAS Manuals setting out application of standards to UK public sector bodies developed by finance ministry and reviewed by the independent Financial Reporting Advisory Board (FRAB) New processes and procedures developed by the UK Finance Ministry 6

4 ACCOUNTING ISSUES Fixed assets: lack of data on asset value/condition/ components, intra-group transactions and balances Consolidation: existing systems and procedures do not collect right data Leases and Service Concessions: existing systems and procedures do not collect right data. Valuation and accounting issues Preparation of financial statements: existing systems do not produce accruals information or statements. Lack of experience in preparing and understanding accruals accounts 7 AUDITOR ISSUES / ADDED VALUE training issues resource issues ADDING VALUE THROUGH AUDIT advisory role - some audit training required - technical updating on financial reporting - lots of opening balance sheet work - extra work during parallel running - well placed to advise on technical and implementation issues - encourage clients to raise issues early, so auditable solutions can be developed - provide support during transition BUT - bodies need to be able to produce their own accounts 8 share good practice - share knowledge with other auditors and other government bodies

5 BENEFITS OF ACCRUAL ACCOUNTING Better accountability and control Opportunities for efficiency gains More effective pursuit of policy Better information for economic planning Valuation of assets and liabilities ACCRUAL ACCOUNTING IS BETTER THAN CASH BASED SYSTEMS 9 FACTORS WHICH LED TO SUCCESS Moving from cash to accruals was a major project needing commitment from politicians, senior officials and funding providers - buy-in was obtained at the highest levels - work was started early - planned and project managed - expertise and resources were made available It still took longer than expected! 10

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